The Financialization of Nature; Or, Neoliberal Environmentalism at Work

The financialization of nature is the process of replacing environmental regulation with markets. In order to bring nature under the control of markets, the planet’s natural resources need to be made into commodities that can be bought and sold for a profit. It is a means of transferring the stewardship of our common resources to private business interests.
MoneyTree1.jpg

Since the economic slowdown of the early 1970s, the financial sector has played an increasingly large role in our economy. The finance sector’s share of domestic corporate profits rose from below 16 percent in the 1970s and 1980s to as high as 41 percent in the decade before the 2008 financial crisis. In the wake of the financial crisis, after seeing its profits plummet, the sector is back to accounting for about 33 percent of domestic corporate profits.

As the finance sector grew in size, it also grew in strength. Policies in Washington came to reflect the interests of financial actors. The 1980s saw a push for deregulation. The Reagan administration pursued deregulation of industries ranging from energy companies to banking. The move for deregulation became broadly bipartisan in the 1990s and culminated in the passage of the Gramm-Leach-Bliley Act of 1999, which removed regulations put in place during the Great Depression to protect banks from the hazards of speculation.

At the same time, so-called market-based approaches to regulation became popular among policymakers. In the place of regulatory structures that prohibited certain activities, policymakers began to favor providing economic incentives for promoting or discouraging certain behaviors. Perhaps the most prominent example of this is the push for cap-and-trade schemes. Touted as a market-based solution to disincentivize pollution, it actually sells the right to pollute, given that a company can front the cost to do so.

Cap and trade is a radical shift in how environmental regulation works. Traditional environmental regulation relies on permission, prohibition, standard setting and enforcement to meet environmental ends. Regulated sectors need to meet the standard set or face penalties. Most classic U.S. regulation, including the Clean Air Act, first enacted in 1970, and the Clean Water Act, first enacted in 1972, fits that mold.

In contrast, cap and trade attempts to create markets in actual or potential pollution to create an economic incentive to pollute less. Many, but not all, systems also include a cap, a system-wide limit to the amount of pollution that can be emitted. Instead of limiting what an individual plant may emit, each polluter is given an allocation of emissions. If it doesn’t use up that allocation in a year, it may sell those emission allowances to another company that polluted more than its allocation.

Those who oppose simply regulating pollution commonly propose cap and trade as a more “free market” approach to environmental problems. The market is used to allocate costs, rather than using the performance-based indicator of meeting a regulated standard. Proposals for cap and trade systems range from using them to limit greenhouse gases to using them to control water pollution.

What all of these cap-and-trade systems have in common is the creation of a new commodity – the right to pollute – that is then sold in a new market. The credits or allowances for the amount of pollution emitted become the private property of the polluter. Financial actors can then build speculative markets that bet on the future price fluctuations in those credits. Because pollution under the cap-and-trade system is supposed to be controlled by the price of the credits, in so far as the financial markets determine that price, regulation of pollution is transferred to those markets.

The financialization of nature is not about protecting the environment; it is about creating ways for the financial sector to continue to earn high profits. Although the sector has begun to rebound from the financial crisis, it is still below its pre-crisis levels of profit. By pushing into new areas, promoting the creation of new commodities, and exploiting the real threat of climate change for their own ends, financial companies and actors are placing the whole world at risk.

Mitch Jones works on environmental and international trade issues.

 


Be the first to comment


Upcoming Events

DSA at the People's Climate March

September 21, 2014 · 42 rsvps
Central Park West between 79th & 80th Streets

We're counting down to the People's Climate March!

Please confirm whether you will march with DSA, meeting no later than 10am on Central Park West between 79th and 80th Streets.

DSAers are gathering in the "We Know Who Is Responsible" section of the march, along with other socialist organizations as well as anti-corporate, peace and justice, and other radical groups.

Why should you march with DSA rather than just going as an individual?

Because you know who is responsible and we need a large group so that our anti-capitalist critique is loud and clear!

We will bring signs with our anti-capitalist climate change slogans for you IF you confirm, once again, that you will march with DSA (RSVP BELOW). We don't want to waste resources making unneeded signs, so please don't RSVP unless you definitely plan to show up no later than 10am between 79th and 80th on Central Park West.

Note: The police will close admission to each block on Central Park West once they deem it “full.” If the police won’t let you on that block you will be told to move north to an open block on Central Park West. Once you are on Central Park West you may be able to move south and find us, but given the expected size of the march that will be very difficult to do. So if we are to have a good sized group we need everybody to arrive on time!

Subways: note that Museum of Natural History takes up all blocks between 77th and 81st, Columbus Ave to Central Park West. There is a Museum Subway stop on the B and C trains, 81st Street, and also an exit on 79th St. at the museum. The exit to the street here is called "77th St" but it is actually at 79th St. You emerge either on 78th or 80th St. when you go up the ramp, so just look for street signs when you exit.

The People's Climate March route is about 2 miles long and ends up on 11th Avenue.

What to bring:

Please bring your camera and take photos of us marching and tweet or post to your Facebook page about the march. Remember to mention you are with DSA.

Finally, there are still some out-of-town DSAers in need of housing. If you can provide a bed, a couch or even floor space for a marcher, and have not responded to a previous email on housing please email Alex Caring-Lobel (helloalexcl (at) gmail.com).

If you have questions you can call Frank Llewellyn (718-522-2269).

Share